[Federal Register: January 31, 2007 (Volume 72, Number 20)]
[Notices]
[Page 4550-4552]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31ja07-110]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55174; File No. SR-CBOE-2007-07]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change to Extend the Duration of the SizeQuote Mechanism Pilot
January 25, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 17, 2007, the Chicago Board Options Exchange,
Incorporated ( ``Exchange'' or ``CBOE'') filed with the Securities and
Exchange Commission (the ``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
substantially by the Exchange. The Exchange filed the proposal as a
``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposal effective upon filing with the
Commission.\5\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
\5\ CBOE gave the Commission written notice of its intention to
file the proposed rule change on January 10, 2007. See Rule 19b-
4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to extend the pilot in CBOE Rule 6.74(f)
pertaining to the SizeQuote Mechanism, which is a process by which a
Floor Broker may execute and facilitate large-sized orders in open
outcry. The Exchange is proposing to extend the pilot program, which
would otherwise expire on February 15, 2007, through February 15, 2008.
No other changes are being made to the pilot program through this rule
[[Page 4551]]
filing.\6\ The text of the proposed rule change is available at http://www.cboe.org/Legal
, at the Exchange, and at the Commission's Public
Reference Room.
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\6\ A separate rule change proposal has been filed and is
currently pending with the Commission that would make amendments to
the SizeQuote Mechanism. See SR-CBOE-2005-115 (proposal to modify
the pilot program in various respects, including to permit a Floor
Broker to execute the entire SizeQuote Order at a price at least one
trading increment better than the best price communicated by the in-
crowd market participants (``ICMPs'') in their responses to the
SizeQuote request).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of those statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
CBOE Rule 6.74(f), which relates to the open outcry ``SizeQuote''
Mechanism, was approved on a pilot basis in February 2005 and was
expanded to include solicited orders in January 2006.\7\ The pilot
program has been extended once and is currently set to expire on
February 15, 2007.\8\ The pilot program provides a process by which a
Floor Broker, using his/her exercise of due diligence to execute orders
at the best price(s), may execute and facilitate large-sized orders in
open outcry. Under the pilot program, the ICMPs have priority to trade
a SizeQuote Order at the best price communicated by the ICMPs in their
response to a Floor Broker's SizeQuote request and at one increment
better, while a Floor Broker can execute the entire SizeQuote Order
with a facilitation order, one or more solicited orders, or a
combination of solicited and facilitation orders at a price two trading
increments better than the best price provided by the ICMPs in their
response to the SizeQuote request. For purposes of the pilot program,
the minimum qualifying order size is 250 contracts \9\ and Floor
Brokers must stand ready to facilitate the entire size of the order for
which they request SizeQuotes.
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\7\ See Securities Exchange Act Release Nos. 51205 (February 15,
2005), 70 FR 8647 (February 22, 2005) (approving SR-CBOE-2004-72 on
a pilot basis through February 15, 2006) and 53135 (January 17,
2006), 71 FR 3908 (January 24, 2006) (approving SR-CBOE-2005-83,
which modified the pilot program to enable a Floor Broker to execute
a SizeQuote Order with either a firm facilitation order, one or more
solicited orders, or a combination of the Floor Broker's
facilitation order and such solicited order(s)).
\8\ See Securities Exchange Act Release No. 53252 (February 8,
2006), 71 FR 8012 (February 15, 2006) (immediately effective
proposal, SR-CBOE-2006-05, extending the pilot program from February
15, 2006 to February 15, 2007).
\9\ The appropriate Exchange committee determines the classes in
which SizeQuote operates and may vary the minimum qualifying order
size, provided that such number may not be less than 250 contracts.
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The instant rule change seeks to extend the existing pilot program,
which would otherwise expire on February 15, 2007, through February 15,
2008. The Exchange notes that, as part of the original pilot program
approval order and subsequent filing to extend the pilot program,\10\
the Exchange represented that it would provide the Commission a report
at the end of the pilot period summarizing the effectiveness of the
SizeQuote program. In that regard, though the SizeQuote Mechanism has
been made available during the pilot period in all equity option
classes traded on the Exchange for orders of 250 contracts or more, the
Exchange's continued experience has been that Floor Brokers have not
generally availed themselves of the SizeQuote Mechanism to facilitate
large-sized orders.\11\ However, the Exchange continues to believe that
the SizeQuote Mechanism enhances ICMPs' ability and incentive to quote
competitively and participate in open outcry trades while at the same
time creates a process that gives greater certainty to Floor Brokers in
the execution of large orders in that ICMPs only have one opportunity
to respond with a quote response (which further enhances an ICMP's
incentive to quote competitively). The Exchange is therefore seeking to
extend the existing pilot program for another year through February 15,
2008 in order to continue its evaluation of the utility of the
SizeQuote Mechanism.
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\10\ See notes 7 and 8, supra.
\11\ The Exchange believes the SizeQuote Mechanism has not been
actively utilized due to some of the limitations and risks inherent
in the original design of the pilot program. Thus, CBOE expanded the
pilot program to include solicited orders. Originally the pilot
program only applied to facilitation orders. See note 7, supra. CBOE
has also proposed to modify the pilot program in various other
respects. See note 6, supra.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \12\ in general and furthers the objectives of
Section 6(b)(5) of the Act \13\ in particular in that it is designed to
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposal.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing rule does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, provided that the self-regulatory organization
has given the Commission written notice of its intent to file the
proposed rule change at least five business days prior to the date of
filing of the proposed rule change or such shorter time as designated
by the Commission, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6)
thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
[[Page 4552]]
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CBOE-2007-07 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-CBOE-2007-07. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the CBOE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-CBOE-2007-07 and should be submitted on or before
February 21, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1509 Filed 1-30-07; 8:45 am]
BILLING CODE 8011-01-P